With dipping sales in fast fashion brand Forever 21, Aditya Birla Fashion
and Retail (ABFRL), the licensee of American fast fashion brand is now
downsizing stores and cutting costs. ABFRL reported a loss of Rs 23 crore
in fast fashion business during the quarter ended December 2017, even as
sales from the business declined 14 per cent from a year earlier to Rs 114
crore (net sales value, or NSV). Losses widened because Forever21 took a
one-time inventory hit, Ashish Dikshit, MD, ABFRL’s Madura Lifestyle
Business. However, NSV comparisons were also affected by changes in GST
rates.

ABFRL has reduced the size of its oldest stores and will now focus on
opening new but smaller stores. Most of these are stores opened by the
brand before ABFRL acquired the licence for Forever21 from previous
partners DLF Brands and Diana Retail.

ABFRL is expecting its fast fashion business to turn around by next
quarter, driven by high double digit like to like sales growth. The firm
has been focusing on cost cutting to help boost margins, primarily through
renegotiating rents and reducing store sizes wherever possible including
for Pantaloons, the firm’s departmental store chain.

Fast fashion brands like Zara and H&M usually operate stores of
25,000-50,000 sq. ft around the world and in India. ABFRL did not specify
how small the new stores will be. Meanwhile Zara closed FY16-17 with Rs
1,023 crore in sales and 20 stores, according to the latest data. Parent
Inditex SA operates Zara stores in a joint venture with Tata’s Trent. Zara
also launched its own e-commerce website in India in October last year.